Gross domestic product (GDP): market value of the final goods and services produced within a country in a given time period. * Market value- not counting items but the value they have ex. 100 oranges=$20, 50 apples=$5 so market value=$25 * Final goods and services-
* Final good: an item bought by its final user during specific time period ex. Truck is a final good * Intermediate good: produced by one firm then used as component of another ex. Michelin tires * Produced within a country- only goods and services produced within a count as part of the GDP * In a given time period- measured in a time period such as a year or quarterly Circular Flow of Expenditure and Income:
Households and firms- buy the services of labour, capital, and land in factor markets * Firms sell and households buy in the goods market
* Consumption expenditure: payment for goods and services * firms buy and sell new capital equipment in the goods market * when goods are not sold and left in inventory, we can think that firms are buying goods from itself * investment: purchase of new plant, equipment, and buildings and the additions to inventory Governments- buy goods and services from firms and their expenditure on goods and services is called government expenditure * finance their expenditure with taxes
* taxes are not part of circular flow of expenditure and income Rest of the World- firms in Canada sell exports and buy imports * value of exports (X) minus imports (M)= net exports
GDP equals Expenditure equals Income- GDP measured by total expenditure on goods and services OR by total income earned producing goods and services. * Total expenditure (aggregate expenditure or aggregate income)= consumption expenditure plus investment plus government expenditure plus net exports. Y=C+I+G+(X-M) Depreciation: decrease in value of a firms capital
Gross investment: total amount spent buying new...